FIIs to participate in futures trading

Mumbai: Futures trading in 31 individual stocks has been permitted by Sebi and is slated to commence from Diwali this year. The decision to permit foreign institutional investors (FIIs) to participate in futures was taken on 5 November by the high-level committee on capital markets chaired by RBI governor Bimal Jalan.

The other committee members include department of economic affairs secretary C M Vasudev, J S Bhagwati and Sebi chairman D R Mehta. The committee has asked Sebi to frame guidelines under which the FIIs will be allowed to trade in futures. These would address issues like exposure, cash volumes and hedging mechanism besides other issues.

So far Sebi has allowed derivatives trading in index futures and options. Other decisions taken by the committee are:
1) Fine-tuning the two-way fungibility mechanism between ADRs and GDRs.
2) Finalised substantial changes to OCB guidelines.

Mehta told presspersons that the Bombay Stock Exchange is already equipped with the necessary software and trading systems and the National Stock Exchange is in line to do the same. Earlier, Finance Minister Yashwant Sinha had allowed two-way fungibility in ADRs and GDRs up to their approved level in the last Budget, which meant that corporates no longer need permission to replenish ADRs and GDRs up to the levels approved.

The committee, in its next meeting, would take up issue of corporatisation of bourses. Sebi is already discussing the modalities with stock exchanges, which involves drawing the fine line between the ownership rights and trading rights of stock exchange board members.